I'm an expert on business growth and overcoming organizational obstacles to success. I do keynote speaking at conferences and management meetings, and a workshop leader for companies wanting to find their next growth engine. Author of "Create Marketplace Disruption: How to Stay Ahead of the Competition" (Financial Times Press), a contributing editor for "International Journal of Innovation Science" and a leadership columnist for CIOMagazine and ComputerWorld. Currently serve as Audit Chair for 6D Global, and am CEO of Soparfilm Energy E&P company as well as Content Laboratory, a communications services company and coms software provider. Former head of business development for Pepsico and Dupont, consultant with The Boston Consulting Group. Harvard MBA. Live in Chicago.

Microsoft Still Can't Find Its Future. Is It Too Late for the Company?

Microsoft needed a great Christmas season. After years of product stagnation, and a big market shift toward mobile devices from PCs, Microsoft’s future relied on the company seeing customers demonstrate they were ready to jump in heavily for Windows8 products – including the new Surface tablet.

Looking deeper, for the 4th quarter PC sales declined by almost 5% according to Gartner research, and by almost 6.5% according to IDC. Both groups no longer expect a rebound in PC shipments, as they believe homes will no longer have more than 1 PC due to mobile device penetration, a market where Surface and Win8 phones have failed to make a significant impact or move beyond a tiny market share. Users increasingly see the complexity of shifting to Win8 as not worth the effort; and if a switch is to be made, consumer and businesses now favor iOS and Android.

Microsoft makes more than 75% of its profits from Windows and Office. Less than 25% comes from its vaunted servers and tools. And Microsoft makes nothing from its xBox/Kinect entertainment division, while losing vast sums in its on-line division (negative $350M-$750M/quarter). No matter how much anyone likes the non-Windows Microsoft products, without the historical Windows/Office sales and profits, it’s hard to see how long Microsoft can remain sustainable.

What can we expect next at Microsoft?

Ballmer appears to have committed to fight to the death in his effort to defend & extend Windows. So expect death as resources are poured into the unwinnable battle to convert users from iOS and Android.

As resources are poured out of the company in the Quixotic effort to prolong Windows/Office, dividends should steadily diminish.

Expect substantial layoffs over the next 3 years. They could even reach 50-60%, or more, of employees.

Expect closure of the long-suffering on-line division in order to conserve resources.

The entertainment division could be spun off, sold to someone like Sony or possibly Barnes & Noble, or dramatically reduced in size. Unable to make a profit it will increasingly be seen as a distraction to the battle for saving Windows, and Microsoft leadership has long shown it doesn’t know how to profitably grow this business unit.

As more and more of the market shifts to competitive cloud infrastructure Apple, Amazon, Samsung and others will grow significantly. Microsoft, losing its user base, will demonstrate its inability to build a new business in the cloud, mimicking its historical failures with Zune (mobile music) and Microsoft mobile phones. Microsoft server and tool sales will suffer, creating a much more difficult profit environment for the sole remaining profitable division.

Missing the market shift to mobile has already forever tarnished the Microsoft brand.

No longer is Microsoft seen as a leader. Instead it is rapidly losing market relevancy as people look to Apple, Google, Amazon, Samsung, Facebook and others for leadership. The declining sales and lack of customer interest could lead to a tailspin at Microsoft not unlike what happened to RIM. Cash will be burned in the struggle to save what Microsoft sees as the core of the company.

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I do like competition Vasile Marita. I see no problem with Google having competition. But from an investor viewpoint Microsoft shareholders would be better off if there was no Bing, as it has consistently lost money for years. No business can survive unless it earns a profit.

If Microsoft had no Bing or any kind of search services, Google would have dominated the search and advertising market and that will be a disaster for everyone. Why did you think Microsoft could offered so much money just to buy Yahoo? With billions at stack, do you think it was a decision made lightly by myopic business people?

What would be truly myopic is if all investors thought that Microsoft should completely cede an important market to a direct competitor. If you cannot even see this big picture, perhaps you have no business in writing pieces about the long term strategies of companies.

Faith is well placed in God PrHike Directory. At times we believe in our government leaders – and at times not. To simply believe in Microsoft would be naive. Even when launching good products (Zune) and Great products (Kinect) the company has not been able to drive those to commercial success like Amazon and Apple have done. This is not an issue of products or engineers, but corporate leadership. After a decade of constant failures, and weak product management, Microsoft has lost market relevancy and is out of time.

Given that Microsoft has not once created anything innovative, I find your faith bewildering.

The few products that they have that are high quality where almost always bought from someone else. Excel is their only product I consider high quality and I guess their wizzywig editor word is best in class, but it pales to superior software like Latex.

Windows has always been a poorly implemented “me too” product. Windows 7 is on par with KDE(A linux desktop interface) from 2006. Windows 8 is a horrible implementation of the Linux desktop interface Unity, which itself is a horrible mess. The desktop has a different usage pattern than tablets, which have a somewhat different usage pattern than smartphones. Combining all three is an epic failure in understanding UI principles. It is like using the same interface for your toaster,electric shaver and car.

They have consistently failed in search, phones, and the Xbox is a huge money loser. Most of their development tools are a massive failure(VisualStudio is the only thing that sells well, despite being inferior to Idea, NetBeans, and Eclipse).

MS SQLServer does okay, but the free Postgresql is easily its technical equal. I know lots of small SaaS businesses ditching SQL Server because they wanted to upgrade from Windows 2000 to a newer Windows server, but the old sql server, which runs just fine, won’t run on newer server versions and requires a sgl server upgrade which means two things: tens of thousands of dollars in license and CAL fees, and lot of extra development work. End result: no money for MS, and a few more Postgresql servers running on Linux. At least all these companies were not stupid enough to lock themselves in .NET and had the non-sql server stuff running on Linux already.

Even products based on existing standards(and then embraced, extended, and extinguished) like Exchange and the aforementioned SQL Server have become bloated beasts.

They are also at the edge of financial difficulty.

They are using creative accounting to keep the bottom from falling out, like pushing the business unit that produces apps for Mac into the entertainment division to prop up its numbers.

They have yet to announce that they are starting work on a new Xbox simply because they don’t want to risk going further in the red. Xbox lost money, several billion. XBox 360 was billions in the hole before the $1+ billion RROD fiasco. Both the Wii and PS3 ate Microsoft’s lunch on gaming consoles. In fact Microsoft has officially announced to not expect a Xbox upgrade anytime soon.

Of course, there is the perennial channel-stuffing to prop up numbers.

They are currently channel-stuffing Windows 8 OEM licenses to make it look like less of a failure.

Look for them to channel stuff the Surface Pro next month just to show that the Pro has a bigger than a 2% market share, which is what they can realistically expect by years end.

in 2013, for the first time in over 20 years, Windows will be a minority OS. 10 years ago Windows had 95% of the non-server computing world. MS never had much of a presence in servers, when you discount the nebulous install counting from throwing 1000 suckers into one Windows server install at crappy hosts like GoDaddy. web, dns, mail, ftp, “cloud”, etc are all Linux and MS, despite throwing money into the market has gone nowhere.

Like Neflix, MS no longer understands what its core business is. To this day DVD’s by mail generate much more revenue and has 10 times greater profit margin than streaming, yet Netflix tried to kill off DVD by mail and lost 75% of their stock price as a result.

Similarly, Microsofts bread and butter is selling to businesses. They completely abandoned that with Widows 8. They have the disease called envy. Whatever Google or Apple does, MS tries to copy it, without knowing why they are doing it and invariably fail. Neither Apple or Google are competitors to MS, yet MS follows them around like the little sister following her big sister everywhere she goes.

Steve Ballmer mocked the iPhone and iPad and is now betting his company on Microsofts “me too” products. Much like Gates dismissed the web as a fad, and it is the web that put MS in its current irrelevant status. There has never been any real foresight and next to no innovation at Microsoft.

If Apple came out with an iCar, you can bet your house that MS would get into the auto industry within two years.

No just yet. Microsoft, like Kodak has lots of patents that their making money off of and if the day ever comes to when Microsoft is broke, then you can blame Bill Gates for hiring the biggest ego in the software market that does’nt know how to run company other than into the ground.

Your mentioning Kodak is well placed BS consulting. The inevitable endpoint is identical. Only the market shift happening now to Microsoft is much faster than the long journey from film to digital photography. So the playout will be much faster. And yes, the current CEO at Microsoft shoulders much of the blame.